State Supreme Court to Review "Trial by Formula" Short Cuts In Class Action

The Pennsylvania Supreme Court agreed earlier this month to review an important class action issue: the use of "trial by formula" as a vehicle to overcome the un-manageability and predominance of individual issues in a proposed class action. Braun et al. v. Wal-Mart Stores Inc. et al., No. 551 EAL 201 (Pa. 7/2/12).

The case involves the appeal of an award for Wal-Mart employees who allegedly worked off the clock by skipping rest and meal breaks.

The state Supreme Court indicated it would review: Whether, in a purported class action tried to verdict, it violates Pennsylvania law (including the Pennsylvania Rules of Civil Procedure) to subject Wal-Mart to a “Trial by Formula” that relieves Plaintiffs of their burden to produce class-wide “common” evidence on key elements of their claims.

There is a huge difference between deciding that aspects of an adequate representative's claim are typical of other class members', and extrapolating from representative's claims to the class as a whole on issues that are admittedly not common.  We noted for readers before that this procedural short cut, which can deny defendants due process and a right to adjudicate and defend against each claim, was criticized in the federal class context in the U.S. Supreme Court's decision in Dukes v. Wal-Mart Stores Inc. The U.S. Supreme Court was clear: "We disapprove that novel project." Because the Rules Enabling Act forbids interpreting federal Rule 23 to abridge,enlarge or modify any substantive right, a class cannot be certified on the premise that the defendant will not be entitled to litigate its defenses to individual claims.

The same issue applies to the trial plans proposed by many mass tort plaintiffs, which try to use the class rule to prevent defendants from ever having an opportunity to litigate individual defenses as to individual class members. Now we may start to see if plaintiffs can evade this by proceeding at a state class level in cases not removable under CAFA.

Court Should Review Punitive Damages Re-Trial Issue

Readers concerned about punitive damages law have their eyes on Wyeth LLC v. Scroggin.  The case involves a woman who allegedly developed cancer after taking hormone therapy drugs. (The FDA continues to approve the drugs as safe and effective.) The plaintiff contends that Wyeth was negligent in failing to include a stronger warning on its label, and that she would not have taken the drug if the warning had been stronger. The district court conducted a bifurcated trial
before a single jury, with liability determined first and punitive damages determined second. In the first phase, the jury found for plaintiff and awarded $2.7 million in compensatory damages. In the second phase, the same jury determined that defendant was liable for punitive damages of $19.4 million. Wyeth LLC v. Scroggin, 554 F.Supp.2d 571 (E.D. Ark. 2008). On appeal, the U.S. Court of Appeals for the Eighth Circuit overturned the punitive damages award, ruling that the award was tainted by the admission of improper evidence during the punitive damages phase of the trial. But rather than ordering an entirely new trial, the appeals court ordered a partial new trial limited to punitive damages only. Scroggin v. Wyeth, 586 F.3d 547 (8th Cir.2009).

Wyeth is seeking Supreme Court review of the denial of its request for an entirely new trial.  Permitting a tort plaintiff to preserve his compensatory damages award at the same time that he pursues punitive damages before a separate jury is unfair to defendants, and it is likely to lead to increases in punitive damages awards. Partial retrials limited to punitive damages violate jury trial rights protected by the Seventh Amendment. The Petition for Cert here, 78 USLW 3566 (3/16/10), describes in detail the sharply conflicting views of the federal appeals courts regarding the circumstances under which partial retrials in jury cases are consistent with the Seventh Amendment, both generally, and specifically with respect to partial retrials confined to punitive damages. It is fair to say some lower courts have struggled to apply the Seventh Amendment standards set forth in Supreme Court precedent, and that the appeals courts have adopted divergent and irreconcilable approaches.

The Washington Legal Foundation submitted an amicus brief on this issue. In its brief urging the Supreme Court to grant review, WLF argued that the Seventh Amendment prohibits such partial retrials limited to punitive damages. WLF argued that the Seventh Amendment “right to trial by jury” has long been understood to constitute those jury trial rights that existed under the English common law when the Seventh Amendment was adopted in 1791. At common law there was no practice of setting aside a verdict in part. If the verdict was erroneous as to any issue, a new trial was directed as to all issues, so that all related issues could be decided by a single jury. Where the issue to be re-tried is related to issues already decided by the first jury, partial retrials create a danger that the second jury will be confused when told that some issues have already been decided.  WLF has argued that in this case the principal issue at any retrial on punitive damages (whether defendant acted sufficiently culpably in failing to provide stronger cancer warnings to merit a punitive award) is substantially similar to an issue decided in the first trial (whether it acted sufficiently culpably in failing to provide stronger cancer warnings to merit an award of compensatory damages).  The similarity of the two issues creates a significant danger of jury confusion, and the Seventh Amendment requires the plaintiff either to accept $2.7 million as her total compensation or to retry her entire case before a new jury.

WLF notes that considerable empirical evidence suggests that permitting partial retrials regarding punitive damages exacerbates the unpredictability of punitive damages awards. Moreover, the evidence suggests that permitting such partial retrials is a considerable disadvantage to tort defendants, who on average are likely to face larger monetary judgments than if a single jury considers all related tort claims.

MDL Court Rejects Consolidation of Bellwether Trials

Readers of MassTortDefense know how significant the earliest few trials in any mass tort can be, influencing later trials and shaping settlement strategies.  Accordingly, which cases go first, from among the hundreds or thousands in the mass tort, and how they are tried, can be extremely significant.  The federal court overseeing the MDL concerning the antibiotic Levaquin recently denied plaintiffs' motion to consolidate three bellwether cases for the first trial. In re Levaquin Products Liability Litigation, MDL No. 08-1943, (D. Minn.). 

In the Order, the court noted that it had initially selected fifteen cases for evaluation and initial case-specific fact discovery in the bellwether-selection process. Directed by the court to meet and confer on an ordering of these cases for the first trials, the parties narrowed the field to seven remaining bellwether cases for selection for trial. Plaintiffs then moved to consolidate three of the cases for the first trial.  They asserted that the cases share similar characteristics that are central to this litigation and that consolidation would promote judicial efficiency and the interests of justice, while testing the merits of plaintiffs’ arguments. Defendants opposed the motion, arguing that plaintiffs had not met their burden of showing that a consolidated trial’s benefits would outweigh individual
issues in the case. Specifically, defendants argued that individual issues – including each
plaintiff’s unique medical history, each prescribing physician’s knowledge of warnings in the Levaquin package insert, and each plaintiff’s alleged injuries – precluded consolidation.

Federal Rule of Civil Procedure 42(a)(2) affords a court broad discretion to consolidate for trial actions involving common questions of law or fact. The party seeking consolidation bears the burden of showing that consolidation would promote judicial convenience and economy. Consolidation is inappropriate, however, if it leads to inefficiency, inconvenience, or unfair prejudice to a party.

Plaintiffs also argued that judicial economy would be served by consolidation because common sources of evidence established the supposedly common facts. For example, the same generic
expert witnesses would testify on behalf of each individual plaintiff, and the regulatory and
corporate history of the drug is the same for each plaintiff. Because of these alleged commonalities and claimed efficiencies, plaintiffs argued that consolidation of the three cases would save the court twenty trial days, not insignificant.
 
In opposition, defendants argued that individual issues, including what dose of Levaquin each physician prescribed to treat each plaintiff’s infection, and each individual plaintiff’s medical history, including their various risk factors for the injury alleged such as age, concomitant medication use including corticosteroids, prior injury, and other factors, all made consolidation inappropriate.

Moreover, defendants argued that consolidation would be prejudicial to them because there are complicated causation issues in each case, and multiple plaintiffs would testify regarding similar injuries, which could cause jury confusion. See In re Consol. Parlodel Litig., 182 F.R.D. 441, 447 (D.N.J. 1999) (“A consolidated trial . . . would compress critical evidence of specific causation and
marketing to a level which would deprive [the defendant] of a fair opportunity to defend itself.”).

At this stage of the MDL, the court concluded, consolidation was not merited. With respect to
the consolidation of cases, the Manual for Complex Litigation notes, “If there are few prior verdicts, judgments, or settlements, additional information may be needed to determine whether aggregation is appropriate. The need for such information may lead a judge to require a number of single-plaintiff, single-defendant trials, or other small trials.” Manual for Complex Litigation § 22.314, at 359 (4th ed. 2004). In the mass tort involving breast implants, the courts noted that that “[u]ntil enough trials have occurred so that the contours of various types of claims within the . . .
litigation are known, courts should proceed with extreme caution in consolidating claims.” In re Bristol-Myers Squibb Co., 975 S.W.2d 601, 603 (Tex. 1998).

To date, there are over 240 federal court cases in this MDL and just under 100 state court cases addressing claims similar to those brought by the bellwether plaintiffs. Indeed, this is a still growing MDL, found the court, the exact factual and legal contours of which are still undefined. The parties continue to conduct critical discovery, including deposing plaintiffs’ prescribing physicians. The merits of the parties’ arguments have not been tested at trial or in dispositive motions.

The court recognized that "the stakes are high" because the initial bellwether trials in this MDL may serve as the basis for the parties’ resolution of remaining, pending cases. Thus, although plaintiffs
appear to have demonstrated some commonalities in fact and law among the three
individual plaintiffs’ cases, this motion was denied at this time. 

Update on Digitek Litigation

In the Digitek MDL, the parties have been wrangling over the defense motion for a Lone Pine order. See generally Lore v. Lone Pine, No. L-336006-85, 1986 WL 637507 (N.J. Super. Ct. Nov. 18, 1986).

Dozens of product liability cases alleging that defendants Actavis Totowa LLC, Actavis Inc. and Actavis Elizabeth LLC marketed Digitek tablets containing double the appropriate dosage were transferred to an MDL assigned to Chief Judge Goodwin of the Southern District of West Virginia last summer. In Re: Digitek Products Liability Litigation, MDL No. 1968 (S.D. W.Va.).
 

Defendants recently moved for a Lone Pine order under which each plaintiff must submit an "affidavit from a medical expert in each case establishing that there is medical evidence of digoxin toxicity." Readers of MassTortDefense recognize this important and logical procedural tool for management of mass toxic tort litigation.  When the major factual battles will be over injury and causation, it may make sense to focus discovery on these issues, and prior to resorting to expensive and time-consuming discovery, to require plaintiffs to come forward with some prima facie showing of injury and specific causation, or as the court put it, "some evidence of certain elements of their claims, e.g. medical causation, to support a credible claim."

The plaintiffs in the federal Digitek multidistrict litigation filed a brief opposing the motion, arguing that the discovery in the MDL is still in its "incipient stages."  As they typically do, the plaintiffs argued that such orders "effectively function as untimely and unjust summary judgment devices and violate the discovery rules for expert witness disclosures and reports." They also argued that they have provided significant case-specific discovery in the form of Plaintiffs' Fact Sheets and records authorizations.

The court entered PTO #43 (Order re Request for Lone Pine Order), saying the motion is taken under advisement pending completion of basic fact discovery of Group 1 cases. Under the latest schedule, Plaintiff shall serve their reports from liability experts no later than March 15, 2010.  The parties shall complete their depositions of Plaintiffs’ liability experts no later than May 28, 2010.  Defendants shall serve their reports from liability experts no later than June 15, 2010. The parties shall complete their depositions of Defendants’ liability experts no later than August 31, 2010. 

At the November 20, 2009, conference each party is to present to the court their choice of five cases that they believe to be representative plaintiffs for trial in accordance with PTO #38, governing the creation of a trial pool upon completion of basic fact discovery, including but not limited to the depositions of plaintiffs, plaintiffs’ physicians who prescribed Digitek® to them, physicians who treated Plaintiffs for alleged digoxin toxicity, and pharmacists who filled plaintiffs’ prescriptions for Digitek®.
 

Parties Spar Over Possible Bifurcation In Mirapex MDL

Pfizer and the other defendants in the Mirapex litigation are seeking a bifurcated trial plan. In motions filed with the U.S. District Court for the District of Minnesota, where MDL-1310 is based, the defendants asked for separate liability and punitive damages phases. Defendants raised the legitimate concern that the jury may be swayed by financial considerations when determining liability.

In this litigation, plaintiffs allege that the drug causes a compulsive urge to gamble. The plaintiffs claim that Mirapex triggered compulsive behaviors, and that the defendants knew the risks but failed to properly study the effects or warn patients. As is so often the case, a label change (in February 2006) seems to have prompted litigation.

Defendants assert that bifurcation is warranted because evidence of defendants' finances is irrelevant to the issues of liability; introduction of such evidence during the liability phase would be unduly prejudicial. Bifurcation is thus necessary to prevent unfair prejudice to defendants during the liability determination. The motions note that the 8th Circuit has recognized bifurcated trial plans in a number of settings. Indeed, bifurcation is a common feature of pharmaceutical mass torts.

Plaintiffs oppose the proposal, arguing that the issue of liability and punitive damages are somehow “intertwined.” Meaning, of course, that they would like for the jury to consider the company’s financials when judging its conduct. Plaintiffs insist on a single trial where the fact finder considers “all the evidence at once.” To the extent some of that evidence should not be considered on the issues of liability, plaintiffs propose that the jury could be instructed to consider the financial information only in the proper context.

MassTortDefense has posted on the importance of proper trial plans here. The Mirapex motions present perhaps the most basic form of bifurcation or trial plan issue.  The timing of the punitive damages issues in class actions or other complex aggregated litigation can become highly complex and controversial. The questions as to punitive damages may include: a) whether they can be awarded; b) if so, whether as a lump sum, as a multiplier of individual compensatory damages, or on a per class member basis, c) whether they can be tried before individual liability as to specific class members, or as to absent class members, or non-bellwether plaintiffs has been decided; d) whether they can be awarded before the actual amount of compensatory damages has been determined; and e) how punitive damages are allocated among class members or the aggregated plaintiffs if not determined on a per plaintiff basis. State Farm Mutual Auto Insurance Co. v. Campbell, 538 U.S. 408 (2003). See In re Simon II, 407 F.3d 125 (2d Cir. 2005); Beck v. Boeing Co., 60 Fed. Appx. 38 (9th Cir. 2003); Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998); Johnson v. Ford Motor Co., 35 Cal.4th 1191,113 P.3d 82 (Cal. 2005) (rejecting aggregate disgorgement); Engle v. Liggett Group, Inc., 945 So.2d 1246, 1265 (Fla. 2006); In re Chevron Fire Cases, 2005 WL 1077516, at *14-15 (Cal. App. May 6, 2005); Colindres v. QuitFlex Manufacturing, 235 F.R.D. 347, 378 (S.D. Tex. 2006).

Punitive damages are designed to punish a defendant for egregious conduct and deter future reprehensible conduct on the part of the defendant or others. Particularly in the context of juries unchecked by proper legal instructions and unorthodox trial plans that prematurely address the punitive damages issue, they constitute a serious litigation threat to product sellers today. In aggregated litigation, such damages have the potential to lead to crippling verdicts, and thus the threat of punitive damages may coerce “blackmail” settlements.

In recent years, the United States Supreme Court has identified a variety of constitutional limits on punitive damage awards. Specifically, such awards cannot be arbitrary punishments and cannot be grossly excessive. In Philip Morris USA v. Williams, 127 S.Ct. 1057 (2007), the Court confirmed a significant constitutional principle limiting punitive damages awards: the Due Process Clause prohibits juries from basing punitive damages awards in part upon the desire to punish a defendant for harm to persons that are not before the court. Williams arose from an Oregon trial wherein a jury awarded $821,000 in compensatory damages and $79.5 million in punitive damages against cigarette manufacturer Philip Morris. At trial, the plaintiff’s attorney had urged the jury to punish Philip Morris for alleged harm to smokers other than the plaintiff by referring to the defendant’s market share and the number of smokers not only in the state of Oregon, but nationwide, who had allegedly contracted a smoking-related illness in the last 40 years. The Supreme Court held that the Due Process Clause forbids a jury from assessing punitive damages to punish a defendant for injury that it inflicts upon non-parties or “strangers” to this litigation. While a jury may consider the actual or potential harm to non-parties in the narrow context of determining “reprehensibility” of the conduct, which in turn is one of the factors relevant to an analysis whether the punitive damages award is excessive or not, it may not punish the defendant for the impact of its alleged misconduct on other people, who may bring lawsuits of their own in which other juries can resolve their claims. The Court cautioned state courts that they must make sure that the “jury will ask the right question, not the wrong one.” That is, evidence regarding alleged injuries of those not before the court must be used solely to judge the reprehensibility of the conduct, not to assess damages for the harm caused to those strangers. While the Court commented on the Oregon court’s refusal to give a jury instruction clarifying this distinction, it noted that state courts cannot authorize any procedures that create an unreasonable and necessary risk of any such confusion occurring. When evidence is introduced or argument made that risks this confusion, the state court must take steps to protect against that risk.

One implication of the Court’s emphasis on avoiding misuse of evidence of harm to “strangers” clearly relates to the employment of reverse-bifurcated trial plans in aggregated cases, in particular trial plans in which the entitlement and amount of punitive damages (by ratio or dollar amount) is set in an early phase of the trial, well before the jury has considered whether the vast bulk of the plaintiffs have actually been injured by the alleged conduct of the defendant. E.g., In re Tobacco Litigation, 624 S.E.2d at 740 (W. Va. 2005)(holding that an aggregated, reverse-bifurcated punitive damage multiplier trial before adjudication of any affirmative defense would not be per se invalid). Some state courts favor this approach because it puts pressure on defendants to settle by creating the risk of a huge punitive damages burden before it has even been established whether many or most of the plaintiffs have any compensatory damages. Such a trial plan clearly creates an unnecessary and unreasonable risk of a due process violation under Williams, one that a simple jury instruction about the distinction between entitlement and reprehensibility cannot hope to address adequately. See, e.g., In re Simon II Litig., 407 F.3d at 138 (“In certifying a class that seeks an assessment of punitive damages prior to an actual determination and award of compensatory damages, the district court’s Certification Order would fail to ensure that a jury will be able to assess an award that, in the first instance, will bear a sufficient nexus to the actual and potential harm to the plaintiff class, and that will be reasonable and proportionate to those harms.”); Allison v. Citgo Petroleum Corp., 151 F.3d at 417–418 (stating that “because punitive damages must be reasonably related to the reprehensibility of the defendant’s conduct and to the compensatory damages awarded to the plaintiffs, . . . recovery of punitive damages must necessarily turn on the recovery of compensatory damages”); Southwestern Ref. Co. v. Bernal, 22 S.W.3d at 433 (“Under the [trial plan], the jury would decide punitive damages for the entire class without knowing the severity of the offense or the extent of compensatory damages, if any, for each of the 885 plaintiffs…. the modified trial plan is … prejudicial because it fails to ensure that punitive damages have some understandable relationship to compensatory damages and are not grossly out of proportion to the severity of the offense for each of the 885 plaintiffs.”).